Tax versus common sense: why the «garbage reform» is stalling

The new system for the treatment of municipal solid waste was to significantly reduce the number of landfills in the country, and make the market for collection and recycling of solid municipal waste transparent and civilized. In reality, however, in some regions of the country a separate collection has not been introduced, the rates of accumulation of waste and the amount of payments cause discontent among residents and social tensions, including mass protest actions.

According to the head of the department for sustainable development of S.U. Witte Moscow University, Alexander Dolgushin, it was not difficult to predict the growth of tariffs a few years ago: “Social tensions are rising, people take to the streets: they are outraged not even by the fact that they overpay for garbage collection, and the fact that the tariff increases unreasonably. At the same time, landfills, waste incineration plants are being built near houses, and people have to pay for all this. ”

The expert is convinced that the problems of “garbage reform” should be solved systematically, and one of the main points of this system is economic incentives for collectors and processors of secondary raw materials. According to Dolgushin, it is possible to prevent the growth of payment for the service for handling MSW by abolishing VAT for regional operators.

It is necessary to return to the system that operated before. You can not take taxes from those who save us, who prevent environmental damage. According to the same logic, it is necessary to take taxes from firefighters for extinguishing fires,
- The expert noted during a public discussion of the reform of the garbage industry in the Russian Federation at the CEC of "United Russia".

The system, which Dolgushin recalls, has operated in Russia since October 2016: thanks to the initiative of State Duma Deputy Alexander Fokin, the implementation of waste paper was exempted from VAT, but it was only a temporary measure - the tax returned to the industry at the same time as the start of the “garbage reform”. Why the government did not want to extend the experiment to free the sale of waste paper from VAT is absolutely not clear: the Fokin system significantly increased the transparency of the industry and reduced government spending on tax administration, the budget received an additional about 9 billion rubles because of the increased tax collection. The analysis carried out by the League of waste paper processors showed that the tax was paid on the entire volume of waste paper that was recycled, that is, only in the first year of Fokin"s VAT, tax collection reached the maximum possible values. Unfortunately, after two years of a successful experiment, the Ministry of Finance, without analyzing the results of Fokin’s VAT and not evaluating the system, decided to return the tax to the industry, and also in an uncomfortable form for all industry participants: VAT is charged under the new agent system The principle of action of which "Reedus" explained earlier. According to Fokin, the proven system needs to be returned not only to the waste paper recycling industry, but also applied to the rest of the secondary resources - plastic, metal and glass: this will serve as an impetus for the processors and ultimately facilitate the promotion of garbage reform. In the meantime, the necessary measures have not been taken, only 6% of TKOs get into the secondary turnover, and this figure should increase to 60% in the next five years. The need for a return to the earlier system of taxation, initiated by MP Fokin, is confirmed by expert studies. Earlier, Reedus cited the opinion of MSU experts who stated the lack of sufficient justification for the introduction of a new taxation system, and also warned of “serious negative consequences in the financial, economic, social, political and environmental spheres”.

Experts of the RANEPA agree with these conclusions. In conclusion, received by the editorial staff of “Reedus”, the researchers come to the conclusion that the agency system of VAT accrual will entail a number of negative economic consequences: one). Revision of the goals and objectives of state (municipal) programs (their structural elements) or other goals of the socio-economic policy of public law education (with respect to non-program tax expenses).
2). Increasing the tax burden of the subjects of financial and economic activities of the waste paper recycling industry, increasing the costs of setting and maintaining tax and accounting VAT, as well as expenses for the acquisition and maintenance of information resources; increased risk of errors in accounting and reporting for waste paper collectors and, as a result, an increase in the number of complaints against them by the tax authorities. First of all, tax risks will arise for enterprises that process waste paper - simply because according to the principle of “we don’t look where we lost, but under a lamp,” they are easier to find and bring to justice, even for their unscrupulous suppliers.
3). Increasing the costs of VAT administration by tax authorities: if 83 processing enterprises paid Fokin"s VAT, now tens of thousands of suppliers receive VAT tax agents.
four). Possible reduction of tax revenues to the budget system of the country from successfully operating enterprises of the waste paper recycling system, which, according to the Federal Tax Service of Russia for 2017, paid over 22 billion rubles in taxes, including 9 billion rubles in VAT. VAT receipts from enterprises of the waste paper recycling sector, as compared to 2016, increased by 5.22 billion rubles, or 2.4 times.
five). The return to the segment of the collection of waste paper VAT will increase the attractiveness of export shipments - thanks to the right to refund VAT on export. With the current export volumes and waste paper prices, reimbursement amounts can reach 700–800 million rubles a year.

The same opinion is shared by experts of the University. S. Yu. Witte and the Higher School of Economics. The initiative to abolish the VAT on the implementation of waste paper found support from the All-Russian Popular Front and “Business Russia”.

However, the greatest danger of returning VAT to the recycling of waste paper is to reduce the number of small enterprises and individual entrepreneurs in the waste paper segment. As a result, we should expect a decrease in the volume of the workpiece, which, in turn, will entail a whole chain of negative consequences.

There will be less waste paper for recycling, that is, less will be produced products of its processing - and this is a very wide range of products. Competition for smaller volumes of waste paper entering the market will increase, which will lead to its rise in price - and, as a result, to a decrease in the profitability of processors. From the point of view of investors, the attractiveness of the waste paper recycling industry will significantly decrease: new projects will not be counted on; moreover, the suspension of already launched projects becomes possible. And under them infrastructure has already been laid - roads, energy, utilities. If VAT Fokin launched a whole chain of development of the industry - agent VAT starts the chain of degradation.

The reduction of domestic production will create a shortage of supply in the domestic market and force consumers to turn to external sources of supply, that is, to import.

On the other hand, reducing the collection of waste paper will mean that increasing amounts of paper waste will be sent to landfills. Now, according to the League of waste paper recyclers, up to 4 million tons of paper waste per year is sent to landfills. In addition to the fact that in monetary terms at current prices for waste paper, this amounts to more than 40 billion rubles, the costs of disposal and the subsequent recultivation of a solid waste landfill of this amount exceed 4.5 billion rubles.

Without solving the basic problems of TKO processors, it is simply impossible to launch the “garbage reform” at the proper level. This is confirmed by the data of the regional coordinator of the “United Russia” project “Clean Country” in the Moscow Region, expert of the All-Russian Popular Front Alexander Kogan. According to him, separate collection of waste has not yet been implemented in almost forty regions of Russia.

In 39 subjects, separate collection of waste is not taken into account either in agreements, nor in contracts, or in a territorial waste management scheme. We have never found at least one mention of separate waste collection. Colleagues should be recommended to reflect this and adopt a program for separate waste collection,
- stated Kogan during the public discussion of the “garbage reform”.

Source: https://www.ridus.ru